On December 17, 2010, the US House of Representatives passed the 2010 Tax Relief Act on a bi-partisan vote. The law is expected to be signed into law by President Obama in its current form. Not a moment too soon, the Act provides for the following extensions through the end of 2012:

• Income tax rates will be held at their current level
• The Child Tax Credit, Earned Income Tax Credit, and American Opportunity tax credit (for higher education) have all been extended

 Other elements of the bill lasting less than two years, among others, are

• The AMT has been “patched” to prevent it from assessing additional tax on middle income earners. This is effective for the 2010 and 2011 tax years.
• The $250.00 deduction for classroom expenses of elementary and secondary school teachers is extended for the 2010 and 2011 years.
• A 2% reduction in payroll taxes for employee and self-employed individuals for 2011 only.
  • This means the amount of taxes withheld from an employees paycheck will decrease 2%, effectively resulting in a 2% raise in pay.
  • Self-employed tax payers will pay 2% less in self-employment taxes.
• Expanded section 179 expensing for businesses was extended through the end of 2011, allowing businesses to deduct up to $500,000 of new asset costs in the first year.
• Beginning with 2012, the act provides for 50% bonus depreciation in the first year of an asset’s use, in lieu of the expanded 179 expensing.

Additional changes were made surrounding the estate tax, and a number of other areas. Conspicuously absent was the provision to repeal the new 1099 reporting requirements.

Want more detail on how the changes will affect you or your business? Feel free to contact us!